<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-27118
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PHARMACOPEIA, INC.
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(Exact name of registrant as specified in its charter
Delaware 33-0557266
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
101 College Road East, Princeton, New Jersey 08540
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(Address of principal executive offices) (Zip code)
(609) 452-3600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days-- Yes X No___
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
CLASS OUTSTANDING AT JULY 31, 1997
------------------------------ -------------------------------------
Common Stock, $.0001 par value 11,561,098
<PAGE>
PHARMACOPEIA, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
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<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets-June 30, 1997 and December 31, 1996 3
Statements of Operations-Three and Six Months Ended 4
June 30, 1997 and 1996
Statements of Cash Flows-Six Months Ended 5
June 30, 1997 and 1996
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7-9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10-11
Item 6. Exhibits and Reports on Form 8-K 12-13
SIGNATURE 14
INDEX TO EXHIBITS 15
</TABLE>
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<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHARMACOPEIA, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,803 $ 17,059
Marketable securities 53,056 64,423
Prepaid expenses and other current assets 2,072 1,525
---------------------------
Total current assets 60,931 83,007
---------------------------
Non-current investments in marketable securities 19,088
Property and equipment, net 10,013 8,295
Other assets 342 677
---------------------------
$ 90,374 $ 91,979
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 830 $ 742
Accrued liabilities 2,132 2,240
Notes payable, current portion 678 710
Deferred revenue 13,060 15,088
---------------------------
Total current liabilities 16,700 18,780
Notes payable, long-term portion 1,078 1,405
Deferred revenue, long-term 1,614 2,046
Commitments
Stockholders' equity:
Preferred stock, $.0001 par value; 2,000,000 shares authorized;
none issued and outstanding
Common stock, $.0001 par value; 40,000,000 shares authorized;
11,557,004 and 11,267,499 shares issued and outstanding at
June 30, 1997 and December 31, 1996, respectively 1 1
Additional paid-in capital 101,883 97,542
Accumulated deficit (30,902) (27,795)
---------------------------
Total stockholders' equity 70,982 69,748
---------------------------
$ 90,374 $ 91,979
===========================
</TABLE>
See accompanying notes to these unaudited financial statements.
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<PAGE>
PHARMACOPEIA, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
--------------------------- -------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Contract revenue $5,586 $2,847 $11,518 $4,854
Operating expenses:
Research and development:
Collaborative 4,178 2,680 8,329 4,887
Proprietary 2,821 1,890 5,550 3,740
General and administrative 1,319 1,163 2,777 2,570
--------------------------- -------------------------
Operating loss (2,732) (2,886) (5,138) (6,343)
Interest income 1,096 1,004 2,160 1,883
Interest expense (61) (63) (128) (114)
--------------------------- -------------------------
Net loss $(1,697) $(1,945) $(3,106) $(4,574)
--------------------------- -------------------------
Net loss per share $(.15) $(.18) $(.27) $(.43)
=========================== =========================
Weighted-average number of
common shares outstanding
during the period 11,371,134 10,852,144 11,320,723 10,671,341
=========================== =========================
</TABLE>
See accompanying notes to these unaudited financial statements.
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<PAGE>
PHARMACOPEIA, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
-------------------------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,106) $ (4,574)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation 1,216 559
Amortization 20 20
Changes in operating assets and liabilities:
(Increase) in prepaid expenses and other current assets (547) (664)
(Increase) decrease in other assets 314 (111)
Increase in accounts payable 88 517
(Decrease) in accrued liabilities (108) (250)
Increase (decrease) in deferred revenue (2,460) 6,738
-------------------------------
Net cash provided by (used in) operating activities (4,583) 2,235
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,934) (4,802)
Purchase of marketable securities (53,174) (52,697)
Proceeds from sales of marketable securities 45,453 36,021
-------------------------------
Net cash used in investing activities (10,655) (21,478)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 4,341 18,637
Increase in notes payable 1,344
Repayments of notes payable (359) (264)
-------------------------------
Net cash provided by financing activities 3,982 19,717
-------------------------------
Increase (decrease) in cash and cash equivalents (11,256) 474
Cash and cash equivalents at beginning of period 17,059 28,612
-------------------------------
Cash and cash equivalents at end of period $ 5,803 $ 29,086
===============================
</TABLE>
See accompanying notes to these unaudited financial statements.
-5-
<PAGE>
PHARMACOPEIA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE (1)-- BASIS OF PRESENTATION
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Interim results are not necessarily indicative of the results that may be
expected for the year. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
NOTE (2)-- NET LOSS PER COMMON SHARE
Net loss per common share is based on net loss for the relevant period
divided by the weighted average number of shares issued and outstanding during
the period. Stock options and common stock issuable upon conversion of warrants
are not reflected as their effect would be antidilutive for both primary and
fully diluted earnings per share computations.
In February 1997, the Financial Accounting Standard Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. The impact
of statement 128 on the calculation of primary and fully diluted earnings per
share is not expected to be material.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OPERATIONS
OVERVIEW
Pharmacopeia, Inc. ("Pharmacopeia" or the "Company") was incorporated in
March 1993 and is engaged in research and development and chemical library
production for collaborations and for its own use. The Company's research and
development has focused on efficient, cost effective, high throughput systems
for synthesizing and screening large libraries of chemicals for new drug
discovery and optimization. The Company has incurred losses since inception and,
as of June 30, 1997 had an accumulated deficit of $30.9 million. The Company
anticipates incurring additional losses over at least the next several years as
it expands its research and development and chemical library production efforts.
The Company expects that its losses will fluctuate from quarter to quarter and
that such variations may be substantial.
RESULTS OF OPERATIONS
The Company expects that its revenue sources for at least the next several
years will be limited to future drug discovery collaboration payments from
Schering Corporation and Schering-Plough Ltd. (together, "Schering-Plough"),
Berlex Laboratories, Inc. ("Berlex"), Novartis Corporation ("Novartis"), Bayer
Corporation ("Bayer"), Daiichi Pharmaceutical Co., Ltd. ("Daiichi"), and Akzo
Nobel/Organon ("Organon") and from other customers under existing arrangements
and others that may be entered into in the future. The timing and amounts of
such revenues, if any, will likely fluctuate. Historical results should not be
viewed as indicative of future operating results. The Company will be required
to conduct significant research, development and production activities during
the next several years to fulfill its obligations under the Schering-Plough,
Berlex, Novartis, Bayer, Daiichi and Organon drug discovery collaborative
agreements and to develop other collaborations and technologies. The Company
does not anticipate having net income in the next several years.
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Revenues for the three and six months ended June 30, 1997 increased to $5.6
million and $11.5 million, respectively, compared to $2.8 million and $4.9
million for the comparable periods in 1996. The increase in 1997 revenues
primarily reflects expanded efforts in the drug discovery collaborations with
Bayer, Daiichi, Organon and Novartis and the achievement of certain milestones
with Berlex and Schering-Plough during the first quarter of 1997.
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<PAGE>
Research and development expenses increased to $7.0 million and $13.9
million for the three and six months ended June 30, 1997, respectively, compared
to $4.6 million and $8.6 million for the corresponding periods in 1996. These
increased amounts primarily reflect increased salaries and personnel expenses as
the Company continued to hire additional research and development personnel,
equipment depreciation, leasehold amortization, and laboratory supplies
purchased in connection with the expansion of the Company's chemical library
production and screening efforts for drug discovery collaborations and for
internal discovery programs.
General and administrative expenses increased to $1.3 million and $2.8
million for the three and six months ended June 30, 1997, respectively, compared
to $1.2 million and $2.6 million for the same periods in 1996. The increase is
primarily attributable to increased payroll and personnel expenses as the
Company continued to hire additional management and administrative personnel,
along with increased patent legal fees.
The Company had interest income of $1.1 million and $2.2 million in the
three and six months ended June 30, 1997, respectively, compared to $1.0 million
and $1.9 million for the comparable periods in 1996. The increase in interest
income resulted from higher average balances of cash, cash equivalents and
marketable securities. Interest expense for both periods is a result of interest
incurred on notes payable.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had working capital of $44.2 million. The
Company has funded its activities through June 30, 1997 primarily through the
sale of equity securities and funding under collaborative arrangements. From
inception through June 30, 1997, the Company received $101.9 million in net
proceeds from equity financing and received $42.3 million in research and
development, license fees and milestone payments under collaborative agreements.
The Company's funds are currently invested in U.S. Treasury and government
agency obligations, investment grade commercial paper and other short-term money
market instruments. The Company may also invest such proceeds in investment
grade, interest-bearing securities having a maximum maturity of two years. As of
June 30, 1997, the Company's cash and cash equivalents totaled $5.8 million.
In addition, the Company had marketable securities of $72.1 million.
In connection with the Company's agreement with the Trustees of Columbia
University and Cold Spring Harbor Laboratory, the Company is required to pay
annual license fees. The Company is also required to pay to Columbia University
certain royalties.
In addition, as of June 30, 1997, the Company had outstanding commitments
for construction and equipment purchases totaling $0.7 million. The Company
anticipates that its capital requirements will continue at approximately the
same level over the next two years as the Company expands it research and
development activities. In connection with such expansion, the Company expects
to incur substantial expenditures for hiring additional management, scientific
and administrative personnel and for planned expansion and upgrading of its
facilities, including acquisition of additional equipment.
-8-
<PAGE>
The Company anticipates that its existing capital resources will be
adequate to fund the Company's operations at least through 1998. There can be no
assurance that changes will not occur that would consume available capital
resources before such time. The Company's capital requirements depend on
numerous factors, including the ability of the Company to enter into additional
collaborative arrangements, competing technological and market developments,
changes in the Company's existing collaborative relationships, the cost of
filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the purchase of additional capital equipment,
acquisitions of other businesses or technologies, the progress of the Company's
drug discovery programs and the progress of the Company's customers' milestone
and royalty producing activities. There can be no assurance that additional
funding, if necessary, will be available on favorable terms, if at all. The
Company's forecasts of the period of time through which its financial resources
will be adequate to support its operations is forward looking information, and
actual results could vary. The factors described earlier in this paragraph will
impact the Company's future capital requirements and the adequacy of its
available funds.
-9-
<PAGE>
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Transaction Number of Aggregate
Date Securities Securities (1) Offering Price
------------ ------------ -------------- --------------
Organon May 31, 1997 Common Stock 276,707 $4,165,000
(1) Transaction exempt from the registration requirements of Section 5 of
the Securities Act of 1933, as amended, by virtue of the exemption
contained in Section 4(2) of such act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on May 9, 1997.
(b) The following persons were elected to continue as the directors of the
Company:
FOR AGAINST
--------- ------------
Frank Baldino 8,297,824 46,581
Edith W. Martin 8,297,554 46,851
Max Wilhelm 8,297,824 46,581
and the following persons are incumbent directors whose terms of office
continued after the Annual Meeting:
Joseph A. Mollica
Gary E. Costley
W. Clark Still
Samuel D. Colella
Eileen M. More
(c) The other matters voted upon and the results of the voting were as follows:
(1) The stockholders voted 7,924,605 shares for and 401,651 shares against
the proposal to approve an amendment to the Company's 1994 Incentive
Stock Plan to increase the number of shares of Common Stock received
for issuance by 500,000 shares. Stockholders holding an aggregate of
18,149 shares abstained from voting on this matter.
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<PAGE>
(2) The stockholders voted 8,335,362 shares for and 6,418 shares against the
proposal to confirm the appointment of Ernst & Young, LLP as independent
auditors for the 1997 fiscal year. Stockholders holding an aggregate of
2,625 shares abstained from voting on this matter.
(3) A separate tabulation of the votes cast for each director are set forth
under Item 4(b) above.
There were no broker non-votes on the forgoing matters.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1****** Restated Certificate of Incorporation of the Registrant.
3.3****** Bylaws of the Registrant, as amended.
4.3* Stockholders Rights Agreement, dated February 15, 1995.
10.1* Series A and Series B Preferred Stock Purchase Agreement,
dated July 21, 1993.
10.2* Series B Preferred Stock Purchase Agreement, dated March 11,
1994.
10.3* Series C Preferred Stock Purchase Agreement, dated December
22, 1994.
10.4* Series D Preferred Stock Purchase Agreement, dated February
15, 1995.
10.5**diamond Amended 1994 Incentive Stock Plan.
10.5(a)diamond Amended No. 3 to the 1994 Incentive Stock Plan dated May 9,
1997.
10.6*diamond 1995 Employee Stock Purchase Plan.
10.7*diamond 1995 Director Option Plan.
10.8*+ Library Collection Agreement, dated as of October 1, 1995,
between Pharmacopeia and Sandoz Pharma Ltd.
10.9*+ Research, License, and Royalty Agreement, dated as of
February 15, 1995, between Pharmacopeia and Berlex
Laboratories, Inc.
10.9(a)++ Amendment No. 1 to Research, License and Royalty Agreement
between the Company and Berlex Laboratories, Inc. dated
November 27, 1996.
10.9(b)++ Amendment No. 2 to Research, License and Royalty Agreement
between the Company and Berlex Laboratories, Inc. dated
June 30, 1997.
10.10*+ License Agreement, dated as of October 6, 1995, among
Pharmacopeia, the Trustees of Columbia University in the
City of New York and Cold Spring Harbor Laboratory.
10.11*+ Collaboration Agreement, dated as of December 22, 1994,
between Pharmacopeia and Schering Corporation and Schering-
Plough, Ltd.
10.11(b)++ Amendment No. 2 to Collaboration Agreement and Random
Library Agreement between the Company and Schering
Corporation and Schering-Plough, Ltd. dated as of April 22,
1996.
10.11(c)++ Amendment No. 3 to Collaboration Agreement and Random
Library Agreement between the Company and Schering
Corporation and Schering-Plough, Ltd. dated as of April 21,
1997.
10.12*+ Random Library Agreement, dated as of December 22, 1994,
between Pharmacopeia and Schering Corporation and Schering-
Plough, Ltd.
10.13* Lease Agreement between Pharmacopeia and Eastpark at 8A.
10.13(a)** Amendment dated as of January 22, 1996 to Lease Agreement
between Pharmacopeia and Eastpark at 8A.
10.13(b)**** Third Amendment to Lease Agreement dated March 31, 1996
between Pharmacopeia and Eastpark at 8A.
10.14* Sublease, dated as of December 7, 1994, between Pharmacopeia
and Enichem Americas, Inc.
10.15* Lease, dated as of May 2, 1994, between Pharmacopeia and
College Road Associates Limited, as amended.
10.15(a)** Lease, dated as of December 1, 1995, between Pharmacopeia
and College Road Associates, as amended.
10.15(b)**** Third Execution and Modification of lease dated June 7,
1996, between Pharmacopeia and College Road Associates
Limited.
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<PAGE>
10.17*diamond Employment Agreement, dated October 4, 1994, between the
Company and Lewis J. Shuster.
10.18*diamond Employment Agreement, dated January 18, 1994, between the
Company and Joseph A. Mollica, Ph.D.
10.19*diamond Employment Agreement, dated May 18, 1993, between the
Company and John C. Chabala, Ph.D.
10.20*diamond Employment Agreement, dated June 3, 1993, between the
Company and John J. Baldwin, Ph.D.
10.21*diamond Employment Agreement, dated December 2, 1993, between the
Company and Nolan H. Sigal, M.D., Ph.D.
10.22*diamond Consulting Agreement, dated April 30, 1993, between the
Company and W. Clark Still, Ph.D.
10.23* Warrant to purchase Common Stock issued to Columbia
University.
10.24* Warrant to purchase Common Stock issued to Cold Spring
Harbor Laboratory.
10.25**+ Collaboration Agreement effective as of December 31, 1995
between Pharmacopeia and Bayer
10.26**+ Random Library Agreement effective as of December 31, 1995
between Pharmacopeia and Bayer
10.29**diamond Employment Agreement, dated January 24, 1996, between the
Company and Nancy M. Gray, Ph.D.
10.30***+ Collaborative Agreement dated as of March 29, 1996 with
Daiichi Pharmaceutical Co., Ltd.
10.30(a)++ Amendment No. 1 to Collaboration Agreement between the
Company and Daiichi Pharmaceutical Co. Ltd, dated April 14,
1997.
10.31****+ Research Agreement, between Pharmacopeia, Inc. and N.V.
Organon dated May 31, 1996
10.32*****diamond Employment Agreement, dated June 20, 1996, between the
Company and Stephen A. Spearman, Ph.D.
10.33***** Lease Agreement, dated June 21, 1996, between Pharmacopeia
and South Brunswick Rental I, Ltd.
11.1* Statement re Computation of Per Share Earnings.
27.1 Financial Data Schedule
27.2 Amended Financial Data Schedule
_______________________
*Incorporated by reference to the same numbered exhibit filed with the Company's
Registration Statement on Form S-1 No. 33-93460.
**Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-K for the year ended December 31, 1995.
***Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-Q for the quarter ended March 31, 1996.
****Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-Q for the quarter ended June 30, 1996.
*****Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-Q for the quarter ended September 30, 1996.
******Incorporated by reference to the same numbered exhibit filed with the
Company's Form 10-K for the year ended December 31, 1996.
+Confidential treatment granted.
++Confidential treatment requested.
(Diamond) Represents a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHARMACOPEIA, INC.
By: /s/ LEWIS J. SHUSTER
-------------------------------
Lewis J. Shuster
Executive Vice President, Corporate
Development & Chief Financial Officer
(Duly Authorized Officer and Chief
Accounting Officer)
Date: August 12, 1997
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<PAGE>
PHARMACOPEIA, INC.
INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT NAME PAGE
10.5 (a) Amendment No. 3 to the 1994 Incentive Stock Plan dated May 9,
1997.
10.9 (a) Amendment No. 1 to Research, License and Royalty Agreement
between the Company and Berlex Laboratories, Inc. dated November
27, 1996.
10.9 (b) Amendment No. 2 to Research, License and Royalty Agreement
between the Company and Berlex Laboratories, Inc. dated June 30,
1997.
10.11(b) Amendment No.2 to Collaboration Agreement and Random Library
Agreement between the Company and Schering Corporation and
Schering-Plough, Ltd. dated as of April 22, 1996.
10.11(c) Amendment No. 3 to Collaboration Agreement and Random Library
Agreement between the Company and Schering Corporation and
Schering-Plough, Ltd. dated as of April 21, 1997.
10.30(a) Amendment No.1 to Collaboration Agreement between the Company and
Daiichi Pharmaceutical Co., Ltd. dated April 14, 1997.
27.1 Financial Data Schedule
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<PAGE>
PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN
Amendment No. 3
---------------
Pursuant to the power reserved to it in Section 14 of the Pharmacopeia,
Inc. 1994 Incentive Stock Plan, as amended (the "Plan"), the Board of Directors
of Pharmacopeia, Inc. hereby amends the Plan as follows:
1. The first sentence of Section 3(a) is hereby amended and restated to
read as follows:
"Subject to the provisions of Section 12 of the Plan, the maximum
aggregate number of shares under the Plan is 1,750,000 shares of
Common Stock. The Shares may be authorized, but unissued, or
reacquired Common Stock."
2. This Amendment No. 3 to the Plan shall be effective only after
approval of a majority of the Company's stockholders as set forth in Section 14.
To record the adoption of this Amendment No. 3, the Company has caused its
authorized officers to affix its corporation name and seal this 9th day of May,
1997.
CORPORATE SEAL PHARMACOPEIA, INC.
Attest: /s/ LEWIS J. SHUSTER By: /s/ JOSEPH A. MOLLICA
--------------------- ----------------------
Lewis J. Shuster, Joseph A. Mollica,
Secretary Chairman, President, and
Chief Executive Officer
<PAGE>
AMENDMENT NO. 1 TO RESEARCH, LICENSE AND ROYALTY AGREEMENT
This Amendment No. 1 to Research, License and Royalty Agreement (the
"Amendment") effective as of November 27, 1996, is entered into by and between
Pharmacopeia, Inc. ("Pharmacopeia") and Berlex Laboratories, Inc. ("Berlex"),
and amends that certain Research, License and Royalty Agreement entered into by
Pharmacopeia and Berlex effective as of February 15, 1995 (the "Agreement").
1. All capitalized terms not defined in this Amendment shall have the meanings
given to them in the Agreement.
2. Section 3.2(b) is amended to read in its entirety as follows:
(b) Addition of Berlex Target.
-------------------------
(i) Following [***] after the Effective Date, the Parties shall
initiate discussions regarding the addition of a new target as an Additional
Berlex Target, and an expansion of the Field to include such Additional Berlex
Target. In connection with such discussions, the Parties shall promptly meet to
(i) discuss a written Research Plan for any proposed Additional Berlex Target,
including without limitation, the number of FTE research positions for the
Research Plan, (ii) define the Field for such Additional Berlex Target, and
(iii) define criteria for the specificity and potency of a Lead Compound, and
agree on whether an appropriate in vivo model exists for the Additional Berlex
-- ---
Target.
(ii) If the Parties fail to agree on a proposed target as an
Additional Berlex Target by [***], Pharmacopeia will continue to conduct
research in accordance with the Research Plan in the initial Field, but shall
have no obligation to conduct research with respect to any proposed Additional
Berlex Target. In such event, the Term and the research on the Initial Berlex
Target shall terminate on [***], an in the period between [***], and [***],
Berlex shall pay to Pharmacopeia [***] research payments that would otherwise be
due during such period pursuant to Section 5.2 below.
(iii) If on or before [***] the parties agree on a proposed target as
an Additional Berlex Target, then Berlex shall pay to Pharmacopeia research
payments for support of a Research Plan as set forth in Section 5.2 below. In
such event, prior to [***], the Parties shall negotiate in good faith and agree
on additional research payments, the milestone payments, royalties and other
amounts to be paid by Berlex to Pharmacopeia with regard to the Additional
Berlex Target, and on any amendments to the Agreement with regard to the
Additional Berlex Target, and on any amendments to the Agreement with regard to
the Additional Berlex Target pursuant to Sections 3.2(e) and 5.2.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
3. Section 5.1 is amended to read in its entirety as follows:
5.1 Term. Subject to Section XIV, and Sections 2.2, 3.2 and 3.5, the Term
----
of this Agreement shall extend until [***] from the Effective Date. The
Term may be extended with the written agreement of the Parties.
4. Section 5.2 is amended to read in its entirety as follows:
5.2 Payment. Subject to the delivery of each quarterly written report from
-------
Pharmacopeia to Berlex referred to in Section 3.1 pursuant to the Research
Plan, Berlex shall pay Pharmacopeia a total of [***] in research payments
as follows:
(a) [***] on the Effective Date.
(b) [***] within [***] of the Effective Date.
(c) [***] within [***] of the Effective Date.
(d) [***] within [***] of the Effective Date.
(e) [***] within [***] of the Effective Date.
(f) [***] within [***] of the Effective Date.
(g) [***] within [***] of the Effective Date.
(h) [***] within [***] of the Effective Date.
(i) [***] within [***] of the Effective Date.
(j) [***] within [***] of the Effective Date.
(k) [***] within [***] of the Effective Date.
(l) [***] within [***] of receipt of the final written report on the
research done pursuant to the Research Plan.
5. Except as specifically modified or amended hereby, the Agreement shall
remain in full force and effect and, as modified or amended, is hereby
ratified, confirmed and approved. No provision of this Amendment may be
modified or amended except expressly in a writing signed by both parties
nor shall any terms be waived except expressly in a writing signed by the
party charged therewith. This Amendment shall be governed in accordance
with the laws of the State of Delaware, without regard to principles of
conflicts of laws.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Amendment as of
the date indicated on this Amendment.
BERLEX LABORATORIES, INC. PHARMACOPEIA, INC.
By:________________________ By:________________________
Name:______________________ Name:______________________
Title:_____________________ Title:_____________________
Date:______________________ Date:______________________
<PAGE>
EXHIBIT 10.9(B)
AMENDMENT NO. 2 TO RESEARCH, LICENSE AND ROYALTY AGREEMENT
This Amendment No. 2 to Research, License and Royalty Agreement (the
"Amendment") effective as of June 30, 1997, is entered into by and between
Pharmacopeia, Inc. ("Pharmacopeia") and Berlex Laboratories, Inc. ("Berlex"),
and amends that certain Research, License and Royalty Agreement entered into by
Pharmacopeia and Berlex effective as of February 15, 1995 (the "Agreement"), as
amended by Amendment No. 1 to Research, License and Royalty Agreement effective
as of November 27, 1996.
1. All capitalized terms not defined in this Agreement shall have the meanings
given to them in the Agreement.
2. Section 1.3 is amended to read in its entirety as follows:
1.3 "Additional Berlex Target" shall mean [***].
3. Section 1.17 is amended to read in its entirety as follows:
1.17 "Field" means the use for the prevention, mitigation, or cure of
diseases of any substance which [***].
4. Section 1.36 is amended to read in its entirety as follows:
1.36 "Other Product" means any drug with activity with respect to the
Initial Berlex Target approved for human or animal use that is not a
Product (i.e., not based on a Development Compound accepted as an Accepted
Development Compound in accordance with Section 6.1(b)) and is within the
scope of a Live Claim. It is understood that a drug meeting the criteria of
the preceding sentence and that also has biological activity outside the
Field (i.e. via a different mechanism of action) shall be an Other Product
only if such drug has an activity (Ki) in the Field of less than [***].
5. Section 1.39 is amended to read in its entirety as follows:
1.39 "Product" means any drug with activity within the Field approved for
human or animal use based on a Development Compound that has received
Acceptance in accordance with Section 6.1(b) and is within the scope of a
Live Claim, or a Derivative thereof. It is understood that a drug meeting
the criteria of the preceding sentence which also has biological activity
outside the Field (i.e., via a different mechanism of action) shall be a
Product.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
6. Section 2.2 is amended to read in its entirety as follows:
2.2 Number of Scientists. Berlex is making the payments described in
Section V based on the requirement that Pharmacopeia shall provide an
average of [***] full-time equivalent ("FTE") research positions.
7. In Section 3.5, the phrase "Chief Scientific Officer for Pharmacopeia"
shall be replaced with "Senior Vice President of Drug Discovery for
Pharmacopeia."
8. In Section 3.7, the phrase "Chief Scientific Officer for Pharmacopeia"
shall be replaced with "Senior Vice President, Chemistry, of Pharmacopeia."
9. Section 4.8 is amended to read in its entirety as follows:
4.8 Random Libraries.
-----------------
(a) For a period of [***] under the Research Plan with respect to the
Initial Berlex Target, Pharmacopeia shall not knowingly screen
Random Libraries with respect to the Initial Berlex Target, nor
shall Pharmacopeia knowingly (i) design Random LIbraries for the
purpose of identifying compounds with activity for the Initial
Berlex Target, (ii) make such Random Libraries, or (iii) use or
sell such Random Libraries to Third Parties or, (iv) use any
structure-function data learned as a result of the research under
the Research Plan for the purposes of subsections (i)-(iii)
above.
(b) For a period of [***} years from the end of the Term, or in the
event research under the Research Plan with respect to the
Additional Berlex Target does not proceed until [***],
until[***], Pharmacopeia shall not knowingly screen Random
Libraries with respect to the Additional Berlex Target, nor shall
Pharmacopeia knowingly (i) design Random Libraries for the
purpose of identifying compounds with activity for the Additional
Berlex Target, (ii) make such Random Libraries, or (iii) use or
sell such Random Libraries to Third Parties or, (iv) use any
structure-function data learned as a result of the research under
the Research Plan for the purposes of subsections (i)-(iii)
above.
(c) It is understood that at any time Pharmacopeia may otherwise make
and provide Random Libraries to Third Parties who may screen such
Random Libraries against any targets, including without
limitation, the Initial Berlex Target and Additional Berlex
Target without the knowledge of Pharmacopeia.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
10. Section 4.14 is amended to read in its entirety as follows:
4.14 Commercialization Status. If Berlex is developing a Product or
------------------------
Other Products, for a period from the end of the Term to the First
Commercial Sale of a Product or Other Product, Berlex shall keep
Pharmacopeia informed of its development activities with respect to
Products and Other Products, including without limitation, the
achievement of the milestones set forth in Section 6.1 and 6.2 and
the commercialization of Products and Other Products, by semi-
annually providing Pharmacopeia with a written report stating the
status of development of each such Product and Other Product. If
research under the Research Plan with respect to the Additional
Berlex Target does not proceed until [***] and if, at any time,
Berlex fails to use diligent efforts to actively develop and
commercialize any Product having activity with respect to the
Additional Berlex Target, or does not cure any breach with respect
to such Product noticed by Pharmacopeia pursuant to Section 14.2(a)
herein within the time permitted thereunder, thereafter Berlex's
rights under Sections 4.5 and 4.9 herein shall terminate worldwide
with respect to such Product, as well as with respect to any Focused
Libraries, Lead Compounds, and Development Compounds from which such
Product was developed. However, notwithstanding the preceding
sentence, Berlex can maintain such rights under Section 4.5 and 4.9
(i.e., such rights shall not terminate) for successive twelve-month
periods by paying to Pharmacopeia a license maintenance fee of [***]
per twelve-month period, payable no later than thirty (30) days
after the commencement of each such twelve-month period.
11. Section 5.1 is amended to read in its entirety as follows:
5.1 Term.
----
(a) Subject to Article XIV and Sections 3.2 and 3.5 (as amended
herein), the Term of the research activities under the
Research Plan shall extend until [***] from the Effective
Date. The Term may be further extended with the written
agreement of the Parties.
(b) Berlex shall, at least [***] prior to the end of the Term,
notify Pharmacopeia in writing whether Berlex wishes to
negotiate an extension of the Term. Such written notice
shall include at least the following information: (i)
whether Berlex wishes to continue conducting research in the
Field or wishes to conduct research with respect to
additional or different targets, (ii) an indentification of
any such proposed additional or different targets, (iii) the
length of the proposed extended Term, and (iv) the proposed
amount of funding for such extending Term.
*Information omitted and filed separately with the Commission under Rule 24b-2
<PAGE>
(c) (i) Berlex shall make a payment to Pharmacopeia, in addition
to the payments due under Section 5.2, on or before the last
day of the Term (the "Wind-Down Payment"). The amount of the
Wind-Down Payment shall be [***]. In the event Berlex fails
to provide Pharmacopeia written notice as provided under
Section 5.1(b), then the amount of the Wind-Down Payment
shall be increased to [***].
(ii) In exchange for the Wind-Down Payment, Pharmacopeia shall provide such
number of FTEs as the Research Committee reasonably agrees,
in order to complete certain activities previously commenced
pursuant to the Research Plan.
12. Section 5.2 is amended to read in its entirety as follows:
5.2 Payment. Subject to the delivery of each quarterly written report from
-------
Pharmacopeia to Berlex referred to in Section 3.1 pursuant to the Research
Plan, Berlex shall pay Pharmacopeia research payments as follows:
(a) [***] on the Effective Date.
(b) [***] within [***] of the Effective Date.
(c) [***] within [***] of the Effective Date.
(d) [***] within [***] of the Effective Date.
(e) [***] within [***] of the Effective Date.
(f) [***] within [***] of the Effective Date.
(g) [***] within [***] of the Effective Date.
(h) [***] within [***] of the Effective Date.
(i) [***] within [***] of the Effective Date.
(j) [***] within [***] of the Effective Date.
(k) [***] within [***] of the Effective Date.
(l) [***] within [***] of receipt of the final written report on the
research done pursuant to the Research Plan.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
All payments made pursuant to this Section 5.2 shall be non-refundable, but
payments under Section 5.2(k) and (l) may be creditable against the Wind-
Down Payment [***].
13. Section 6.1(a)(ii) is amended to read in its entirety as follows:
(ii) [***] upon the initiation of GLP toxicity studies for each
Development Compound for which Berlex decides to develop a Separate
Indication and which is a Distinct Molecule from other Accepted
Development Compounds; provided, however, that the Milestone Payment
provided in this Section 6.1(a)(ii) is not due and payable for a given
Development Compound if (i) with respect to a Development Compound
having activity against the Additional Berlex Target, research under
the Research Plan with respect to the Additional Berlex Target has
proceeded until at least [***], and (ii) with respect to a Development
Compound having activity against either the Initial Berlex Target or
the Additional Berlex Target, at least one Accepted Development
Compound has not been provided to Berlex by Pharmacopeia so as to
enable Berlex to initiate GLP toxicity studies within [***] from the
start of research by Pharmacopeia with respect to the applicable
Berlex target (the "Start Date"). The Start Date will be determined by
the Research Committee with respect to the Initial Berlex Target and
the Additional Berlex Target, respectively, and stated in the first
quarterly research report following such Start Date.
14. Section 6.1(b) is amended to read in its entirety as follows:
(b) Acceptance of Development Compounds. The "Acceptance" of each
-----------------------------------
Development Compound to become an "Accepted Development Compound"
shall be determined by the Research Committee in good faith based on
criteria set forth in the Research Plan. Notwithstanding the above, in
the event that research under the Research Plan with respect to the
Additional Berlex Target does not proceed until [***] or the Research
Committee no longer exists, then "Acceptance" for a particular
Development Compound shall be deemed to have occurred on the date when
Berlex initiates [***] based on the applicable Lead Compound or
Development Compound.
15 The first nine (9) lines of Section 6.2 (comprising the introductory
paragraph thereof) are deleted and replaced with the following:
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
6.2 Milestones on Other Products. If Pharmacopeia fails to provide Berlex
----------------------------
a Development Compound having activity against the Initial Berlex Target
within [***] years of the Start Date, but provides Berlex with a Lead
Compound within the Term, and Berlex initiates GLP toxicity studies on such
Lead Compound or a compound Derived therefrom after the Effective Date, and
such Lead Compound or a compound Derived therefrom becomes an intended
Other Product or an Other Product, then Berlex shall pay to Pharmacopeia
Milestone Payments with respect to such Other Product or intended Other
Product as follows:
16. Section 6.5 is amended to read in its entirety as follows:
6.5 No Obligations for Non-Products. It is understood that Berlex is in
-------------------------------
the Business of developing products for the prevention, treatment, cure and
mitigation of diseases in animals and that Berlex has extensive research
programs independent of Pharmacopeia. Pharmacopeia acknowledges that Berlex
has no obligations to pay Pharmacopeia royalties for a product in the Field
which Berlex independently researched, developed and commercialized, either
alone or in conjunction with Third Parties, without the use of or reliance
on Developed Technology or Pharmacopeia Base Technology, as shown by
written records kept in the ordinary course of business consistent with
pharmaceutical industry standards (a "Non-Product"). Unless, with respect
to a particular putative Non-Product, Berlex has not initiated GLP
toxicity studies within the periods set forth in Sections 6.1(a) or 6.2(b)
if applicable, within thirty (30) days of the filing of an IND with respect
to each Non-Product for which Berlex believes no royalties and/or Milestone
Payments are due Pharmacopeia, Berlex shall notify Pharmacopeia of such
filing, and shall, to the extent it may do so without breaching any
contractual or other legal obligation, provide Pharmacopeia with a
statement explaining why Berlex believes the Non-Product was independently,
researched, developed and commercialized, either alone or in conjunction
with Third Parties without the use of or reliance on Developed Technology
or Pharmacopeia Base Technology and is independent of Berlex's activities
under the Research Plan. Berlex is not required to provide written records
referred to above at the time providing such statement, but may have to
provide such records pursuant to Section 15.19. Such Information shall be
deemed Berlex confidential Information pursuant to this Agreement.
17. The first ten (10) lines of Section 7.3 (comprising the introductory
paragraph thereof) are deleted and replaced with the following:
7.3 Royalties on Other Products. If Pharmacopeia fails to provide Berlex
---------------------------
an Accepted Development Compound having activity against the Initial Berlex
Target within [***] years of the Start Date, but provides Berlex with a
Lead Compound within the Term, and Berlex initiates GLP toxicity studies on
such Lead Compound or a compound Derived therefrom after the Effective
Date, and such Lead Compound or a compound Derived
<PAGE>
therefrom becomes an Other Product, then Berlex shall pay to
Pharmacopeia royalties with respect to such Other Product for a
Separate Indication and which is a Distinct Molecule from any other
Products or Other Products, as set forth below:
18. Section 14.2 is amended by the deletion of subsection 14.2(d).
19. Except as specifically modified or amended hereby, the Agreement shall
remain in full force and effect and, as modified or amended, is hereby
ratified, confirmed and approved. No provision of this Amendment may
be modified or amended except expressly in a writing signed by both
parties nor shall any terms be waived except expressly in a writing
signed by the party charged therewith. This Amendment shall be
governed in accordance with the laws of the State of Delaware, without
regard to principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties has executed this Amendment as
of the date indicated on this Amendment.
BERLEX LABORATORIES, INC. PHARMACOPEIA, INC.
By:______________________ By:_____________________
Name:____________________ Name:___________________
Title:___________________ Title:__________________
Date:____________________ Date:___________________
<PAGE>
EXHIBIT 10.11(B)
AMENDMENT NO. 2
This Amendment No. 2 ("Amendment") to the Collaboration Agreement and the
Random Library Agreement effective December 22, 1994 between the parties hereto
(the "Agreements") is effective as of April 22, 1996, (the "Effective Date") and
by agreement of the parties as of the Effective Date amends the Agreements as
follows:
1. All capitalized terms herein shall have the same meaning as in the
Agreements.
2. This Agreement sets forth the terms on which Pharmacopeia will provide to
Schering the [***] Libraries prepared by Pharmacopeia pursuant to the
Collaboration Agreement for screening by Schering.
3. Pharmacopeia will provide the [***] Libraries listed on attached Exhibit A
to Schering in accordance with the cost schedule therein, and at Schering's
request, provide rearrays of such Libraries and decodes of Library Compounds on
the terms set forth on such Exhibit. Schering shall not provide any [***]
Library to any third party without the prior written consent of Pharmacopeia,
except that such consent shall not be required if the third party (i) does not
have, and will not have, any rights to any Agreement Compound, and (ii) in the
ordinary course of its business provides screening on a fee-for-service basis.
4. Any [***] Compounds, Derivative [***] Compounds and [***] Products
resulting from Schering's screening shall be subject to the provisions in the
Collaboration Agreement relating thereto, including without limitation, the
milestone and royalty obligations set forth in Sections 6.3.2 and 6.4.1(b) of
the Collaboration Agreement.
5. Any [***] Compounds, Derivative [***] Compounds, and [***] Products
resulting from Schering's screening shall be subject to the provisions in the
Collaboration Agreement relating thereto, including without limitation, the
milestone and royalty obligations set forth in Sections 6.3.1 and 6.4.1(a) of
the Collaboration Agreement.
6. In the event that Schering demonstrates that any Library Compound in a
[***] Library has biological activity with respect to a particular target
outside the [***] and [***] Fields, and such Library Compound has no significant
biological activity in the [***] or [***] Fields, Schering may with notice to
Pharmacopeia designate such Library Compound as a Subject Compound (as such term
is used in the Random Library Agreement). Each Subject Compound and Derivative
Compounds thereof, and the corresponding Agreement Products, shall be treated as
Agreement Compounds and Agreement Products (as such terms are defined in the
Random Library Agreement), respectively, and shall be subject to the provisions
in the Random Library Agreement relating thereto, including without limitation,
the milestone and royalty obligations set forth in Sections 4.2.1 and 4.3.1 of
such Agreement.
* Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
7. The remaining terms of the Agreements, except to the limited extent
modified by the terms of this Amendment, and Amendment No. 1 to the Agreements
effective as of August 14, 1995, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their authorized representatives and delivered in triplicate
originals on the Effective Date.
SCHERING CORPORATION PHARMACOPEIA
By: ______________________________ By: ______________________________
Name: ____________________________ Name: ____________________________
Title: ___________________________ Title: ___________________________
SCHERING-PLOUGH, LTD.
By: ______________________________
Name: ____________________________
Title: ___________________________
<PAGE>
EXHIBIT 10.11(C)
AMENDMENT NO. 3 TO COLLABORATION AGREEMENT
This Amendment No. 3 to Collaboration Agreement (the "Amendment")
effective as of April 21, 1997, is entered into by and between Pharmacopeia,
Inc. ("Pharmacopeia") and Schering Corporation and Schering-Plough, Ltd.
(collectively, "Schering"), and amends that certain Collaboration Agreement
entered into by Pharmacopeia and Schering effective as of December 22, 1994 as
amended (the "Agreement").
1. All capitalized terms not defined in this Amendment shall have the meanings
given to them in the Agreement.
2. Revise Section 1.2 to read in its entirety as follows:
1.2 "Agreement Compounds" shall mean [***] Compounds, Derivative [***]
-------------------
Compounds, [***] Compounds, Derivative [***] Compounds, [***] Compounds and
Derivative [***] Compounds, as well as any compositions-of-matter claimed in
patents filed or issued under Article IX which claim [***] Compounds, Derivative
[***] Compounds, [***] Compounds, Derivative [***] Compounds, [***] Compounds,
Derivative [***] Compounds. Agreement Compounds shall not include Excluded [***]
Products, Excluded [***] Products or Excluded [***] Products.
3. Revise Section 1.10 by the addition of new Section 1.10.3:
1.10.3 "Exclusively Period" with respect to any (i) [***] Library
------------------
containing an [***] Compounds, or (ii) any [***] Library, shall mean for all
compounds contained in such Library, until [***] after the end of the Research
Program, as such period may be extended pursuant to Section 2.2, except with
respect to [***] Compounds where the period shall be extended until [***].
4. Revise Section 1.19 by the addition of new Section 1.19.3, 1.19.4 and
1.19.5:
1.19.3 "[***] Library" shall mean any library containing compounds
-------------
developed by Pharmacopeia based on (i) proprietary Pharmacopeia information or
proprietary Schering [***], and (ii) based on and including structures which
have been shown to have activity in the [***] Field during and in the course of
the Research Program.
1.19.4 "[***] Library" shall mean any library (excluding any [***]
-------------
Library) conceived after the effective date of this Amendment and prepared by
Pharmacopeia based on proprietary Schering [***].
1.19.5 "[***] Library" shall mean any library (excluding any [***]
-------------
Library, [***] Library, [***] Library or [***] Library) prepared by Pharmacopeia
for use in Pharmacopeia's internal and external programs, including the Research
Program.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
5. Add the following new definitions to Article 1:
1.34 "[***] Compound" shall mean any compound which demonstrates activity
--------
in the [***] Field at a concentration of [***], contained in a Library screened
by Pharmacopeia or Schering or their respective Affiliates during the term of
and in the course of performing the Research Program. It is understood that
[***] Compounds shall include compound(s) which are [***] even if they also have
biological activity via a different mechanism of action.
1.35 "Derivative [***] Compound" shall mean any compound which
---------- --------
demonstrates activity in the [***] Field at a concentration of [***], which is
derived from an [***] Compound by Pharmacopeia, Schering or their respective
Affiliates or another third party under the authority of Schering. As used
herein, a compound shall be deemed to have been "devired from" a [***] Compound
(unless it is an Excluded [***] Product) if it (i) is a chemical modification
made to an [***] Compound, (ii) is otherwise derived from a chemical synthesis
program based on an [***] Compound, (iii) is based on structure-function data
developed in such a program, or (iv) is developed with the use of the Licensed
Technology. It is understood that Derivative [***] Compounds shall include
compound(s) which are [***], even if such compounds also have another biological
activity via a different mechanism of action.
1.36 "[***] Field" shall mean the therapeutic or prophylactic treatment
-----
or prevention of diseases and conditions in humans or animals through the use of
compound(s) that are [***] alone or which, in addition, have other biological
activity via a different mechanism of action.
1.37 "[***] Product" shall mean any product containing a [***] Compound
-------
or Derivative [***] Compound for use in the [***] Field, except Excluded [***]
Products.
1.38 "Excluded [***] Product" shall mean any product for use in the
-------- -------
[***] Field which does not contain a [***] Compound or a Derivative [***]
Compound (except as set forth in subsection (i) herein), but contains (i) any
Derivative [***] Compound conceived more than [***] years after the end of the
Research Program (the "Termination Date"), except if such a conceived compound
falls within the scope of a patent granted on a Schering Invention, Joint
Invention or Pharmacopeia Invention and (1) issued as of the Termination Date or
(2) issued from a patent application pending as of the Termination Date (or a
division or continuation of such an application) and issued subsequent to the
Termination Date, (ii) a compound which is developed by Schering or its
Affiliates or by a third party under the authority of Schering during or after
the end of the Research Program, independently of the intellectual property set
forth in subsections (i)-(iv) of Section 1.35, as shown by contemporaneous
documentation, or (iii) any compound resulting from a logical series of
medicinal chemistry modifications to a compound described in subsection (ii)
above, developed by Schering independently of the intellectual property set
forth in subsections 1.35 (i)-(iv), as shown by contemporaneous documentation.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
6. The Collaboration Agreement shall be revised as follows:
(a) In Sections 2.3.1(e) and (g), 3.4.3, 3.5, 11.4 and 13.3, all
references to [***] Libraries shall also be deemed to refer to [***]
Libraries. In addition, Sections 2.3.1(e) and (g), 3.5, 11.4 and 13.3 shall
also be deemed to refer to [***] Libraries.
(b) In Sections 2.3.2(b), 2.7, 3.4.3 and 5.2, all references to
the [***] Field shall also be deemed to refer to the [***] Field.
(c) In Sections 1.20.2, 2.7, 5.2 and 6.3.5, all references to
[***] Compounds shall also be deemed to refer to [***] Compounds.
(d) In Sections 1.20.2 and 2.7, all references to Derivative
[***] Compounds shall also be deemed to refer to Derivative [***]
Compounds.
(e) In Sections 2.3.2(b), 2.5(a), 2.7, 2.8, 5.2, 6.3.1 (as
amended herein), 6.4.1(a) and 9.2.6, all references to Excluded [***]
Products shall also be deemed to refer to Excluded [***] Products.
(f) In Sections 2.7, 2.8, 5.2, 6.3.1 (as amended herein), 6.3.5,
6.4.1(a), 6.4.2, 6.4.3, 6.4.4., 7.1, 8.1, 8.2, 8.3 and 8.4, all references
to [***] Products shall also be deemed to refer to [***] Products.
7. Section 2.3 is amended by the addition of new Section 2.3.1(i):
2.3.1(i)During the third year of the Research Program, Pharmacopeia will
provide a minimum of [***] full-time equivalent research positions to conduct
the Research Program.
8. Revise Article 3 by the insertion of new Section 3.2A:
3.2A [***] Library Exclusivity. Pharmacopeia and its Affiliates shall
-------------------------
not with respect to any of the compounds described in Section 1.10.3 during the
applicable Exclusivity Period described in Section 1.10.3 make or use
themselves, except with respect to the Research Program or as permitted in
Section 5.7, or knowingly provide any such compounds, for any purpose, to any
third person or entity. With respect to any [***] Library not containing an
[***] Compound, Pharmacopeia agrees not to screen such [***] Library in the
[***] Field, on its own account or on behalf of a third party until [***] years
after the end of the Research Program. This Section shall survive the
termination or expiration of this Agreement.
9. Section 3.3 is amended to read in its entirety, as follows:
3.3 Annual Extensions. Schering shall have the right to extend the
-----------------
Exclusivity Period described in Section 1.10.2(i) or Section 1.10.3(ii) for
successive one (1) year periods by
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
notifying Pharmacopeia no later than sixty (60) days prior to the end of the
Exclusivity Period, and concurrently paying to Pharmacopeia a maintenance fee
of [***] for each year per Field, and the actual direct and indirect costs
attributable to the preparation of any additional library plates as may be
required for further assays, and the decoding of compounds with biological
activity selected by Schering from such Libraries.
10. In Section 3.4.2, line 3, change "random libraries" to [***] Libraries."
11. Section 3.4 is amended by the addition of new Section 3.4.4:
3.4.4 Screening for Activity in the [***] Field. During the Research
-----------------------------
Program, Pharmacopeia and its Affiliates may screen any Library for activity in
the [***] Field. All compounds identified as having activity at a concentration
of [***] with respect to any target actually screened in the course of
Pharmacopeia's performance of the Research Program in the [***] Field shall be
considered [***] Compounds for all purposes of this Agreement. However, it is
understood that no [***] Library or [***] Library shall become a [***] Library
under any circumstance, and that there is no Exclusivity Period with respect to
any [***] Library that does not contain an [***] Compound except as provided in
Section 3.2A, or with respect to any [***] Library. Any milestone payments made
pursuant to Section 6.3.1 with respect to such [***] Compounds or corresponding
[***] Products shall be in addition to any other milestone payments due pursuant
to the operation of Section 6.3.1 or 6.3.2 of the Agreement.
12. Section 5.1 is amended to read in its entirety as follows:
5.1 License to Schering.
-------------------
5.1.1 [***] Fields. Subject to the terms and conditions of this
------
Agreement, Pharmacopeia agrees to grant, and hereby grants, (i) to Schering
Corporation an exclusive license under the applicable Licensed Technology
(exclusive even as to Pharmacopeia and its Affiliates) to make, have made and
use Agreement Compounds (other than [***] Compounds, Derivative [***] Compounds,
and compounds claimed in a patent or patent application filed or issued under
Article IX that also claims an [***] Compound or Derivative [***] Compound), and
to make, have made, use and sell corresponding Agreement Products (other than
[***] Products) in the United States, including its territories and possessions,
in the [***] Field and [***] Field; and (ii) to Schering-Plough, Ltd. an
exclusive license under the applicable Licensed Technology (exclusive even as to
Pharmacopeia and its Affiliates) to make, have made and use Agreement Compounds
(other than [***] Compounds, Derivative [***] Compounds, and compounds claimed
in a patent to patent application filed or issued under Article IX that also
claims an [***] Compound or Derivative [***] Compound), and to make, have made,
use and sell corresponding Agreement Products (other than [***] Products)
outside the United States and its territories and possessions, in the [***]
Field and [***] Field. It is understood that such licenses shall include
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
the right to discover and develop Agreement Compounds and Agreement Products and
to conduct drug research in the [***] Field and [***] Field after the term of
the Research Program during the term of this Agreement.
5.1.2 [***] Field.
-----
(a) Subject to the terms and conditions of this Agreement,
Pharmacopeia agrees to grant, and hereby grants, (i) to Schering Corporation an
exclusive license under the applicable Licensed Technology (exclusive even as to
Pharmacopeia and its Affiliates) to make, have made and use [***] Compounds and
Derivative [***] Compounds, and make, have made, use and sell [***] Products in
the United States, including its territories and possessions, in the [***]
Field; and (ii) to Schering-Plough, Ltd. an exclusive license under the
applicable Licensed Technology (exclusive even as to Pharmacopeia and its
Affiliates) to make, have made and use [***] Compounds and Derivative [***]
Compounds, and make, have made, use and sell [***] Products, outside the United
States and its territories and possessions, in the [***] Field. It is
understood that such licenses shall include the right to discover and develop
Agreement Compounds and Agreement Products and to conduct drug research after
the term of the Research Program during the term of this Agreement.
(b) Subject to the terms and conditions of this Agreement,
Pharmacopeia agrees to grant, and hereby grants:
(i) to Schering Corporation an exclusive license under
the applicable Licensed Technology (exclusive even as to Pharmacopeia and its
Affiliates) to make, have made and use any Agreement Compound (other than an
[***] Compound or Derivative [***] Compound) which is claimed in a patent or
patent application filed or issued under Article IX that also claims an [***]
Compound or Derivative [***] Compound, and to make, have made, use and sell
corresponding Agreement Products in the [***] Field in the United States,
including its territories and possessions; and
(ii) to Schering-Plough, Ltd. an exclusive license
under the applicable Licensed Technology (exclusive even as to Pharmacopeia and
its Affiliates) to make, have made and use any Agreement Compound (other than an
[***] Compound or Derivative [***] Compound) which is claimed in a patent or
patent application filed or issued under Article IX that also claims an [***]
Compound or Derivative [***] Compound, and to make, have made, use and sell
corresponding Agreement Products in the [***] Field outside the United States
and its territories and possessions.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
(iii) It is understood that the foregoing licenses
shall include the right to discover and develop Agreement Compounds and
Agreement Products and to conduct drug research in the [***] Field after the
term of the Research Program during the term of this Agreement.
13. Amend Section 5.5 by the addition of new Section 5.5.3:
5.5.3 With Respect to the [***] Field. During and until the earlier of
------------------- -----
(a) [***] after the termination of the Research Program, if the Research Program
in the [***] Field does not proceed with full staffing until [***], or (b) [***]
after the end of the Research Program, Pharmacopeia and its Affiliates will not
knowingly (i) make compounds or combinatorial libraries for or with any third
person or entity specifically for screening in the [***] Field alone or for
screening in the [***] Field in conjunction with screening other fields, (ii)
perform contract screening for or with any third person or entity with respect
to the [***] Field, (iii) perform for its own account any screening of compound
in the [***] Field, or (iv) provide materials or reagents to any third person
for screening for activity in the [***] Field.
14. Amend Section 5.8 to read in its entirety as follows:
5.8 Pharmacopeia Assay License. Pharmacopeia and its Affiliates shall
--------------------------
have the nonexclusive right to use during the Research Program intellectual
property of Schering, such as reagents, as reasonably necessary to assay
compounds in [***], [***], [***] and [***] Libraries for activity in the [***]
Fields, as appropriate, and as permitted pursuant to Section 3.4.2 or for
purposes of the demonstration required under Section 5.11(b). Pharmacopeia and
its Affiliates shall also have the nonexclusive right to use during the Research
Program intellectual property of Schering relating to [***] for the design and
synthesis of [***] Libraries and [***] Libraries. Except as provided herein with
respect to Section 5.11(b), the licenses granted under this Section 5.8 shall
expire upon the expiration or termination of the Research Program and
Pharmacopeia shall thereafter have no further right or license to use any
intellectual property of Schering which is subject to this Section 5.8.
Pharmacopeia will not be required to pay any fees to use such intellectual
property, but will as a condition precedent to such use execute any consents or
sublicenses required by any Schering licensor. Pharmacopeia shall not be
required to execute any unreasonable consents or licenses and will not be in
breach of this Agreement for failure to do so.
15. Revise Article 5 by the insertion of new Section 5.11:
5.11 License to Pharmacopeia Outside [***] Field
------------------------------- -----
(a) Subject to the terms and condition of this Agreement,
Schering Corporation and Schering-Plough, Ltd. agree to grant, and hereby grant
to Pharmacopeia an exclusive, worldwide license under the interest of Schering
Corporation and Schering-Plough,
*Information omitted and filed separately with the Commission under Rule 24b-2
<PAGE>
Ltd. (exclusive in each case even as to Schering Corporation, Schering-Plough,
Ltd. and their Affiliates) in the applicable Licensed Technology to make, have
made and use any compound in an [***] Library (other than an [***] Compound or
Derivative [***] Compound) which is claimed in a patent or patent application
filed or issued under Article IX that also claims an [***] Compound or
Derivative [***] Compound, and to make, have made, use and sell corresponding
Agreement Products outside the [***] Field.
(b) If Pharmacopeia demonstrates to Schering that any Agreement
Compound (other than an [***] Compound, Derivative [***] Compound, or compound
in an [***] Library), which is claimed in a patent or patent application filed
or issued under Article IX that also claims an [***] Compound or Derivative
[***] Compound, does not have activity against the [***] at a concentration
[***], then Schering Corporation and Schering-Plough, Ltd. agree to grant, and
hereby grant to Pharmacopeia an exclusive, worldwide license under the interest
of Schering Corporation and Schering-Plough, Ltd. (exclusive in each case even
as to Schering Corporation, Schering-Plough, Ltd. and their Affiliates) in the
applicable Licensed Technology to make, have made and use such Agreement
Compound, and to make, have made, use and sell corresponding Agreement Products
outside the [***] Field.
16. Section 6.1.1 is amended to read in its entirety as follows:
6.1.1 Research Program Funding. Schering agrees to pay to Pharmacopeia
------------------------
research funding with respect to the Research Program, in the following amounts:
Period Amount
------ ------
Year 1 [***]
Year 2 [***]
During the third year of the Research Program, Schering shall pay [***] in
research funding for such period. Any payments for full-time equivalent research
positions payable by operation of this or the other sections of this Agreement
shall be deemed offset against the aforementioned payments in this Section
6.1.1, provided it is understood that Schering's total obligations may not
exceed [***] in such third year. However, if the Research Program is expanded
pursuant to Section 2.4, or if substitute or additional targets have been added
to the Research Program pursuant to Section 2.4, Schering shall pay to
Pharmacopeia the additional amounts specified in such Sections which are be due.
If the Research Program is extended pursuant to Section 2.2.2, Schering shall
pay to Pharmacopeia the additional amounts specified in such Section which are
due.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
17. The second sentence of Section 6.3.1 is amended by inserting after "one (1)
time", the phrase "in the [***] Field and one (1) time in the [***] Field".
18. After Pharmacopeia has notified Schering that it has completed screening a
[***] Library or [***] Library in the Research Program in the [***] Field,
Schering may upon written notice request that Pharmacopeia provide to Schering
copies of such [***] Library or [***] Library for screening by Schering against
any target, on the following terms and conditions:
(a) Pharmacopeia will provide such Library to Schering within six (6)
months of such written request. Schering shall pay to Pharmacopeia the direct
and indirect costs associated with preparing such Library. At Schering's
request, Pharmacopeia shall provide rearrays of such Libraries and decodes of
Library compounds on the terms set forth on Exhibit A hereto. Schering shall not
provide any [***] Library or [***] Library to any third party without the prior
written consent of Pharmacopeia, except that such consent shall not be required
if the third party (i) does not have, and will not have, any rights to any
Agreement Compound, and (ii) in the ordinary course of its business provides
screening on a fee-for-services basis.
(b) Any [***] Compounds, Derivative [***] Compounds and [***]
Products, and any other product based on inhibitory activity against a [***]
resulting from Schering's screening of the [***] or [***] Libraries, shall be
subject to the provisions in the Collaboration Agreement relating to [***]
Compounds and [***] Products, including without limitation, the milestone and
royalty obligations set forth in Section 6.3.1 and 6.4.1(a) of the
Collaboration Agreement.
(c) In the event that Schering demonstrates that any Library compound
in a [***] Library or a [***] Library has biological activity with respect to a
particular target which is not a [***], and such Library compound has no
significant biological activity in the [***] Fields, Schering may with notice to
Pharmacopeia designate such Library compound as a Subject Compound (as such term
is used in the Random Library Agreement entered by the parties effective
December 22, 1994). Each Subject Compound and Derivative Compounds thereof, and
the corresponding Agreement Products, shall be treated as Agreement Compounds
and Agreement Products (as such terms are defined in the Random Library
Agreement), respectively, and shall be subject to the provisions in the Random
Library Agreement relating thereto, including without limitation, the milestone
and royalty obligations set forth in Sections 4.2.1 and 4.3.1 of such Agreement.
19. Pharmacopeia will provide to Schering the [***] Libraries prepared by
Pharmacopeia pursuant to the Agreement for screening by Schering on the
following terms and conditions:
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
(a) Pharmacopeia will provide the [***] Libraries to Schering in
accordance with the cost schedule on attached Exhibit A, and at Schering's
request, provide rearrays of such Libraries and decodes of Library compounds on
the terms set forth on such Exhibit. Schering shall not screen any [***] Library
in the [***] Field or [***] Field; nor shall Schering provide any [***] Library
to any third party without the prior written consent of Pharmacopeia, except
that such consent shall not be required if the third party (i) does not have,
and will not have, any rights to any Agreement Compound, and (ii) in the
ordinary course of its business provides screening on a fee-for-services basis.
(b) Any [***] Compounds, Derivative [***] Compounds and [***]
Products resulting from Schering's screening shall be subject to the milestone
and royalty provisions set forth in Sections 6.3.1 and 6.4.1(a) of the
Collaboration Agreement.
(c) In the event that Schering demonstrates that any Library compound
in a [***] Library has biological activity with respect to a particular target
outside the [***] Fields, and such Library compound has no significant
biological activity in the [***] Fields, Schering may with notice to
Pharmacopeia designate such Library compound as a Subject Compound (as such term
is used in the Random Library Agreement entered by the parties effective
December 22, 1994). Each Subject Compound and Derivative Compounds thereof, and
the corresponding Agreement Products, shall be treated as Agreement Compounds
and Agreement Products (as such terms are defined in the Random Library
Agreement), respectively, and shall be subject to the provisions in the Random
Library Agreement relating thereto, including without limitation, the milestone
and royalty obligations set forth in Sections 4.2.1 and 4.3.1 of such Agreement.
20. Except as specifically modified or amended hereby or by the Amendment to
the Collaboration Agreement dated December 18, 1996, and Amendments No.1 and 2
to the Collaboration Agreement and Random Library Agreement, the Agreement shall
remain in full force and effect and, as modified or amended, is hereby ratified,
confirmed and approved. No provision of this Amendment may be modified or
amended except expressly in a writing signed by both parties nor shall any terms
be waived except expressly in a writing signed by the party charged therewith.
This Amendment shall be governed in accordance with the laws of the State of New
Jersey, without regard to principles of conflicts of laws.
* Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Amendment as of
the date indicated on this Amendment.
SCHERING CORPORATION PHARMACOPEIA, INC.
By: ______________________________ By: ______________________________
Name: ____________________________ Name: ____________________________
Title: ___________________________ Title: ___________________________
Date: ____________________________ Date: ____________________________
SCHERING-PLOUGH, LTD.
By: ______________________________
Name: ____________________________
Title: ___________________________
Date: ____________________________
<PAGE>
AMENDMENT NO. 1 TO COLLABORATION AGREEMENT
This Amendment No. 1 to Collaboration Agreement (the "Amendment") effective
as of April 14, 1997, is entered into by and between Pharmacopeia, Inc.
("Pharmacopeia") and Daiichi Pharmaceutical Co., Ltd ("Daiichi"), and amends
that certain Collaboration Agreement entered into by Pharmacopeia and Daiichi
effective as of March 29, 1996 (the "Agreement").
1. All capitalized terms not defined in this Amendment shall have the meaning
given to them in the Agreement.
2. Section 7.6 is amended to read in its entirety as follows:
7.6 Equity Investment. Subject to the terms and conditions of the Common
-----------------
Stock Purchase Agreement, Daiichi shall purchase from Pharmacopeia on the
Effective Date $5,000,000 of Pharmacopeia Common Stock [***]. In addition,
Daiichi shall purchase from Pharmacopeia $3,000,000 of Pharmacopeia Common
Stock [***] the date of (i), (ii), (iii) mentioned below, which purchase of
Pharmacopeia Common Stock shall occur on the tenth (10th) business day
following [***].
3. Article 7 is amended by the addition of the following new Section 7.9:
7.9 Confirmation of [***]. Promptly following Pharmacopeia's
---------------------
indentification of a Collaboration Compound as [***], Pharmacopeia shall
notify Daiichi thereof and shall provide to Daiichi a [***] sample of such
Collaboration Compound. Daiichi shall have [***] from the date it receives
such sample (the "Confirmation Period") to notify Pharmacopeia whether
Daiichi has confirmed that such Collaboration Compound satisfies the
Criteria for [***]. In the event that Daiichi's analysis does not confirm
that a particular Collaboration Compound indentified by Pharmacopeia as
[***] meets the Criteria for [***], Daiichi shall promptly notify
Pharmacopeia during the Confirmation Period, and Daiichi and Pharmacopeia
personnel will work together, at Pharmacopeia's laboratories, for a period
not to exceed [***] from the date Daiici initially received the sample, to
make a final agreed determination whether or not such Collaboration
Compound satisfies the Criteria for [***].
4. Except as specifically modified or amended hereby, the Agreement shall
remain in full force and effect and, as modified or amended, hereby
ratified, confirmed and approved. No provision of this Amendment may be
modified or amended except expressly in a writing signed by both parties
nor shall any terms be waived except expressly in a writing signed by the
party charged therewith. This Amendment shall be governed in accordance
with the laws of the State of New Jersey, without regard to principles of
conflicts of laws.
*Information omitted and filed separately with the Commission under Rule 24b-2.
<PAGE>
In WITNESS WHEREOF, each of the parties has executed this Amendment as of
the date indicated on this Amendment.
DAIICHI PHARMACEUTICAL CO., LTD. PHARMACOPEIA, INC.
By:_____________________________ By:_____________________________
Name:___________________________ Name:___________________________
Title:__________________________ Title:__________________________
Date:___________________________ Date:___________________________
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